Free MT Life Practice Questions

Sample Practice Questions

Try these 10 sample questions from the MT Life practice bank. Each includes the answer and explanation. Continue with the interactive practice above to review the full question set.

1. 1A client will pay scheduled annual premiums for 20 years, then wants life coverage to remain in force without further scheduled premiums. Which whole life type fits?

   1. A. Ordinary level-premium whole life
   2. B. Limited-payment whole life
   3. C. Single-premium whole life
   4. D. Interest-sensitive whole life

   Answer: B

   Explanation: "Premiums are paid over a shorter time, but coverage lasts a lifetime." That is the defining premium and coverage timing of limited-pay whole life. The other choices have different payment structures.

   Reference: NAIC Life Insurance — Whole Life Insurance—Types

2. 2An insured develops a disability covered by an optional life-policy rider. After the rider's waiting period, the insured wants required premiums suspended. Which rider provides that benefit?

   1. A. Accidental death benefit rider
   2. B. Payor benefit rider
   3. C. Waiver-of-premium rider
   4. D. Guaranteed insurability rider

   Answer: C

   Explanation: "With a waiver of premium rider, you can stop paying your life insurance premium if you develop a covered illness or disability named in the rider." The insured meets the rider's trigger. The alternatives describe other distinct rider benefits.

   Reference: NAIC Life Insurance Consumer Guide — Life Insurance Riders—Waiver of Premium

3. 3A life insurer discovers a false material health answer after issuing coverage. Which consequence does the NAIC buyer's guide identify as possible?

   1. A. Coverage remains in force only if extra premium is paid
   2. B. Coverage may be reduced or canceled after discovery
   3. C. Coverage automatically converts to reduced paid-up insurance
   4. D. Coverage is suspended until the next premium anniversary

   Answer: B

   Explanation: "it could reduce or cancel your coverage." The guide ties discovery of false application statements to possible reduction or cancellation. The other remedies are not the identified consequence; applicable contestability rules still govern.

   Reference: NAIC Life Insurance Buyer’s Guide — p. 6, Understand the Application Process

4. 4A parent asks a producer to estimate coverage needed to protect dependents if the parent dies. Which calculation best addresses that need?

   1. A. Projected premiums payable during the policy term
   2. B. Current cash value available from an existing policy
   3. C. Expected dependent support, final expenses, and debts
   4. D. Maximum face amount offered for the parent's risk class

   Answer: C

   Explanation: "How much life insurance to buy depends on the financial needs that will continue after your death." Support, final costs, and debt are post-death needs; premiums, existing cash value alone, or underwriting maximum do not measure them.

   Reference: NAIC Life Insurance Buyer’s Guide — p. 3, How Much Coverage Do I Need?

5. 5A newly hired Montana insurance-department employee asks who has ultimate control and supervision of the department. Who does state law identify?

   1. A. The commissioner
   2. B. The attorney general
   3. C. The state treasurer
   4. D. The legislature's audit committee

   Answer: A

   Explanation: The commissioner is the correct authority. MCA 33-1-301(1) states, "The insurance department shall be under the control and supervision of the commissioner."

   Reference: 33-1-301. Insurance department -- control -- appropriations, MCA — MCA 33-1-301(1)

6. 6A new Montana life policy will cause an existing policy to lapse, be surrendered, or otherwise terminate. Under Montana's replacement rule, what is the transaction?

   1. A. A conversion
   2. B. A continuation
   3. C. A viatical settlement
   4. D. A replacement

   Answer: D

   Explanation: The transaction meets Montana's replacement definition. ARM 6.6.303(9) includes an existing policy that is "lapsed, forfeited, surrendered, or partially surrendered".

   Reference: Mar 2001 Issue 21 — ARM 6.6.303(9), Montana Administrative Register Issue 21 (Nov. 8, 2001), pp. 2222–2223

7. 7If a universal-life policyowner skips a planned premium, what current obligation must the policy's cash value be sufficient to cover to keep coverage active?

   1. A. Cash value remains sufficient for current insurance costs
   2. B. Cash value equals the full annual planned premium
   3. C. Cash value equals all future scheduled premiums
   4. D. Cash value equals the full stated death benefit

   Answer: A

   Explanation: "The policy remains active as long as the cash value is enough to cover insurance costs." A skipped planned payment is acceptable only while cash value covers current insurance charges; it need not equal the full premium, all future premiums, or face amount.

   Reference: NAIC Life Insurance — Universal Life Insurance

8. 8A policyholder wants the right to increase life coverage at specified future dates without another medical exam. Which rider provides that right?

   1. A. Guaranteed insurability rider
   2. B. Term insurance rider
   3. C. Return-of-premium rider
   4. D. Cost-of-living rider

   Answer: A

   Explanation: "A guaranteed insurability rider lets you increase your death benefit at certain times in the future without a medical exam." The client's need is a future increase without medical proof, unlike the other rider triggers.

   Reference: NAIC Life Insurance Consumer Guide — Life Insurance Riders—Guaranteed Insurability

9. 9An employer applies to own life coverage on a key worker. Which evidence specifically establishes an insurable-interest basis for this third-party purchase?

   1. A. A financial loss the employer would suffer if the worker dies
   2. B. The employer's ability to pay every scheduled policy premium
   3. C. The worker's consent to release medical underwriting records
   4. D. A complete beneficiary form submitted with the application

   Answer: A

   Explanation: "life insurance policies can be taken out by spouses or anyone who is able to prove they have an insurable interest in the person." NAIC also explains that "The death of any of these key people would likely have a serious negative impact on the business’ bottom line." The employer's financial loss supports its interest; premium ability, medical consent, and beneficiary forms serve different purposes.

   Reference: NAIC Life Insurance Consumer Guide — Life Insurance—Insurable Interest

10. 10A policyowner transfers an existing life policy to a company for cash below its death benefit. Which transaction is this?

    1. A. Life settlement
    2. B. Policy loan
    3. C. Cash surrender
    4. D. Accelerated benefit

    Answer: A

    Explanation: "A life settlement is the sale of a life insurance policy to another person or company in return for a cash payment of less than the full amount of the death benefit." The transfer to a buyer matches a settlement, whereas a loan, surrender, or accelerated benefit uses a different transaction.

    Reference: NAIC Understanding Life Settlements — Defining the Terms—Life Settlement